With poor real economic indicators in the beginning of this year, the South Korean economic growth rate is expected to show zero percent growth for six quarters in a row, as the rate is likely to stay at the zero percent level in the first quarter.
One official from a private economic research institute said on March 15, “The growth rate of the first quarter compared to the previous quarter is expected to stay at a zero percent level, as the indices such as the industrial product and export indexes were poor in the beginning of the year along with deteriorating consumer sentiment.” The official added, “If the growth rate stays at the zero percent level even with the base effect from the fourth quarter of last year, which showed a low growth rate, it means that the national economy is going through a considerable hardship.”
The situation is similar to that shown in 2011 to 2013, recording a zero percent level growth for nine quarters during the period.
Although the Bank of Korea (BOK) predicted in the beginning of the year that the economy will turn around in the first quarter, overcoming the poor performances in last year’s fourth quarter, it is, however, continually showing a poor real economic index in the beginning of the year.
The industrial output in January dropped by 1.7 percent and, in particular, the reduction in mining and manufacturing industries was the greatest since the financial crisis in 2008 with 3.7 percent. Exports decreased 0.7 percent and 3.4 percent in January and February, respectively, and consumption also reduced 3.1 percent in January.
Domestic and foreign economic research institutes, which reported South Korean economic growth at rates from mid to late 3 percent, are working to lower or change the growth rate predictions. The BOK, which changed the growth rate to 3.4 percent in January, hinted that it will lower the yearly growth rate prediction again this month. The Korea Institute of Finance (3.7 percent), Korea Economic Research Institute (3.7 percent), and Hyundai Research Institute (3.6 percent) are also looking to lower their predictions.
Foreign institutes already lowered South Korean growth rates. The IMF lowered the growth rate to 3.7 percent from the original 4.0 percent. Nomura Securities lowered it to 2.5 percent from the original 3.0 percent on March 10, giving out a 2 percent level growth prediction for the first time. Deka Bank (3.3 percent → 3.0 percent), Moody's Corporation (3.4 percent → 3.0 percent), IHS Economics (3.1 percent → 3.0 percent), and Deutsche Bank (3.6 percent → 3.4 percent) all lowered their growth rate predictions one after another.